Some weeks ago we had our first round of a game I like to call Hypothetical CEO, where you pick a company or situation, place yourself at the virtual helm and strategize away. Our first round – What Would You Do as CEO of Twitter? – netted a couple dozen great ideas and comments and made for some good reading. Now again I’ll pose a current web startups company, give you some background and my own answer and open the comments to hear what you, my fellow netsetters have to say!
Today’s Hypothetical:
What Would YOU Do If You Were In Charge of YouTube?
Background
It wasn’t so long ago that YouTube stunned the world when it got picked up by Google for a wallet busting $1.65B. At the time it looked like the book had been shut on the seemingly endless speculation as to how the startup would make money and cover its mammoth bandwidth bills.
Three years on and not only is the speculation back but the numbers have gotten colossal. According to a Credit Suisse analyst YouTube is on track to post a $470m loss in 2009. Yes, that’s right – close to half a BILLION dollars in losses.
Losses are OK as long as there is light at the end of the tunnel. But the lack of revenue is not from lack of effort. Google has been experimenting heavily with different monetization efforts but it seems advertisers aren’t keen to have their message running alongside the infamously dubious content often served up on Google’s video showpiece.
BusinessInsider recently ran a great piece analysing why the chips are out of YouTube’s favour. According to the math, YouTube would have to achieve $9.48 CPM on their content to make it work with their extraordinary bandwidth bills of some $700m a year. Since CPMs for user generated content are usually measured in the sub-dollar mark this seems like a hard target to hit. Competitor Hulu.com claims to hit $30 CPM but given the nature of their content (straight from the major networks) it’s chalk and cheese when compared to the mostly amateur filled YouTube.
Things look so bleak that Time Magazine recently declared YouTube to be one of the ten biggest tech failures of the last decade, an honor it shared with such notorious nosedives as Gateway, Vista and the Zune.
Of course it would be foolish to write off a company with pockets as deep and resources as great as Google’s. So I put it to you dear readers, what would YOU do if you were suddenly bequeathed the title of YouTube CEO?
My Answer
So here’s my answer to the question. I think there are two fronts that YouTube is suffering on. On the one hand it is spending too much in the form of storage and bandwidth and on the other it isn’t monetizing its content well enough. Sure the two are interlinked and solving one really well would solve the other. But in a situation like this it strikes me that the best action to take is to fight both and aim to get a cheaper product that makes more. So here are three things that I would pursue:
- Find a Way to Use P2P Technology to Stream Videos
YouTube/Google is big enough that there probably aren’t many economies of scale left to be had with the current bandwidth model, at least not in the near future. So any solution to fight bandwidth costs is going to need significant innovation. When you think about it though there is one model of content transfer that DOES work well for enormous amounts of content, it’s called Peer to Peer and it’s what powers torrents! Of course torrents as they are now wouldn’t work, but with Google’s engineering prowess it seems there must be a way to change the way popular video content is streamed. Sure, I’m probably ignoring every major technical hurdle in the book and happily admit to not knowing anything about how p2p or Flash video players work, but it *seems* like it should be possible somehow. In fact after a little digging, I discovered that NewTeeVee ran a story last year about precisely this possibility eventuating. - Focus on Acquiring More Premium Content – Music Videos!
Hulu have proven that premium video content online can pay off. The question is how to get more of it onto YouTube. One particularly popular form of premium content that YouTube could dominate (in fact they already do well with these) is music videos. Despite the fact that music videos are strictly speaking promotional content in themselves, they should still serve as content worth advertising next to. I’m sure there must be other types of premium content that don’t fit into the Hulu model that YouTube could monopolize also. - Build in a Pay-Per-View Section
Cable has proven that Pay-Per-View works, so why not create a facility for serving up this type of content on YouTube? Not only would some types of premium content provider be interested, but from a user-generated point of view there is one definite field of content where people are willing to pay to watch – that is educational. When it comes to quality How-To videos, where the content is worthwhile people will pay small increments to watch, I know this because Tuts+ charges for exactly this type of content. So why not create a micro-payment based pay-per-view that charges say 10 cents to watch a video and puts a share back in the customer’s wallet?
What Would YOU Do?
So that’s my 2 cents. Now over to you! Comment in your brilliant YouTube strategy, or let me know what you think of my three pronged strategy! Will YouTube be monetizable on its current course? Was YouTube a smart move for Google? How can they stem their epic losses?
1. I think youtube can build a premium subscription model like tutsplus has
.
2. Selective pruning, no need to run videos that do not gt any traction for over years?
3. More premium content.
Now if only I knew how to revolutionise the way P2P works, there would be a lot of money to be had. That begs the question, if you could come up with a solution, would you “sell to youtube” or attempt to become a competitor?
Offer premium access to visitors at a moderate cost. Or monetize movie downloads; or both…
Charge for high-end premium users. Flickr has this. Blip.tv has this. They each charge around $20 to get things like higher storage space for Flickr and quicker upload times and skipping the queu.
If YouTube had a monthly upload cap, or a storage cap for users, then charged $20 a month thereafter that could work. If 95% of users are under that point, then they are charging just those that use there service heavily, and only a small fee. I’m not sure what those numbers work out to and how much of a dent it makes in there losses, but it’s one thought. Thx.
Whoops. I meant to say $20 a year. Thx.
My 2 cents:
1) Google doesn’t pay the same bandwidth price us small timers pay for our website and web services. They pay a substantially small rate for bandwidth because of the amount of bandwidth they use. Their cost is even less considering the fact that most of their data centers are located very close to (and in some instances, inside) internet backbones; they pay a premium price for that but in return their speed goes up and in some cases their cost goes down. I doubt peer to peer technology will work (even if its feasible) considering the amount of video they host.
My solution is to cut bandwidth cost by purchasing or create you own internet backbones so that you don’t have to lease bandwidth from sprint or verizon or others.
2) Google will not win the CPM war with HULU with amateur contents. Instead concentrate on going head to head by getting more premium contents that is either not available with hulu or get a deal which will give content owners better incentives to host their contents for longer period of time. Currently Hulu hosts tv shows for 5-10 day/weeks and Google’s collection of shows/movies is not something to be proud of.
3) Premium membership in the form of better features for amateur publishers. A lot of professional sites use youtube to host videos. Give them unique/superior features in the form of monthly subscription fees. Flickr does it.
YouTube is not even close to being a failure.
According to Comscore YouTube has a 42% share of the online video market. 10 times more than their nearest competitor.
The Internet is in its early stages of development, to ensure Google are secure, well into the future, they need to dominate the important parts of the Internet.
Google currently dominates both Search and Video, two of the largest areas online. Their Email and Documents apps are also very influential.
YouTube may make a loss for a few years to come, but owning the video market is far more important than making a profit.
As CEO of Google, I would be more interested in buying another loss making product, twitter, than turning YouTube around any time soon. Owning real-time search is a slice of the Internet pie Google won’t want to miss out on.
Jon
Agree with many of the suggestions so far – especially better content to raise the CPM and a solution to the massive storage/bandwidth costs. Most importantly their is a need for a better advertising platform. YouTube ads aren’t targeted enough or high impact enough. Have a look at the Chinese site tudou.com and see how they do their background/skin ads on videos.
Those type of ads are good for the advertiser, and isn’t as annoying as other forms of video advertising – pre-roll, bugs, post-roll.
In saying that, Youtube is currently blocked in China so I guess that is saving them some money
I like the ideas from Sean Hodge, the $20(or some appropriate amount) for the top 5% users can be a good start but the problem s there are still comparable free hosts available and they might loose some of their top users.
While I realize that you can’t bleed $$ forever doesn’t it help a large company like Google to have a $$ loser on the books? Doesn’t this help offset the record profits from their other revenue streams?
I’ll freely admit I don’t fully understand tax laws and how those entities interact but I know some other large US business’s that operate $$ losers for just that reason.
I would add limit of 3 minutes on the length of the video which can be increased by paying a small yearly fee to remove the limit.
First thing I would do is redesign the look of YouTube! It looks horrible.
I think Vimeo got the best look of all the online video guys.
Easy. Introduce the Flickr business model.
As you’ve mentioned in previous articles on your blog, the key to bringing the tube into the greens is by following the money trail. By allowing premium content providers (big studios, distributors, independents etc) to charge for streams. Best thing to do is stream the first two minutes (just like on pay per view) and then ask for the user to login and click proceed – where his pre-paid account will be charged a small sum.
Sure, some may say that’s what HULU is for – but you’re forgetting that HULU caters only to the American market – AND YouTube is still the market share leader (BY FAR for online content) and has already got an insane amount of content providers who could ante up their game and produce better content to compete in the market.
In addition to this, it would make great sense for youtube to allow premium subscribers full autonomy over the front-end css design of their micro-site, to allow them to integrate the system with their own sites. You can even do this more simply by just integrating the payment / user login setting into the embedded videos that you can paste on third party sites.
I’d make HQ streaming work :[
Hmm…I’ve always thought YouTube was doomed as a business, but as Hypothetical CEO, here’s what I’d do:
1. Add short targeted ad segments inline with the video. YouTube already has extensive tagging of videos, so why not slap advertiser content at the beginning, end or inline with the content?
2. Since viewers would quickly get annoyed with 1), offer a premium membership so that *publishers* could pay a small monthly fee to eliminate ads from their own content.
3. Then viewers could also opt to pay an even smaller fee to remove ads from *all* content they view, or could deal with a mixture of the two for free.
4. Finally, to keep my model from imploding, I’d restrict ads in general to only appearing in videos longer than say, 1 minute.
Basicaly making Youtube a content hosting site for videos, paid for by publishers, then secondarily by advertisers, and finally by the viewers themselves. 3 streams of potential income.
This is a good discussion because Youtube needs to find a way to stay around because youtube is the only place for sharing online video in my opinion. If you see people talking to each other, they’ll be sharing youtube links, not vimeo, not anything else…just youtube as the primary video site.
I think the pay per view is a good idea for premium style content but what I think they should do is steal the thunder from hulu except charge for it. The thing with hulu is although it’s free, the quality isn’t up to par. YouTube has the capabilities of having HD content so they could charge a small fee per month for access to premium HD tv shows and movies, much like netflix’s watch instantly feature.
In addition, I think that people that have accounts should be limited to the 10 minutes or whatever but people that actually make videos for a living or are well paid companies should be able to upgrade their account for a small monthly fee (3 bucks per month) and be able to upload videos up to 2.5 hours in length with high quality settings and a self-branded style of setup. Basically more customization for their page.
Google should also integrate their adsense system into youtube to where as you get views you make money (which in turn gives youtube money as well).
The rest should be free, viewing videos, uploading videos, sharing videos on other sites. I think their ads and the three things I mentioned above would bring in a significant increase in revenue.
As a Youtube CEO.
I would agree with focusing on acquiring more premium content, content like movies and short films. With premium content we would implement the next objective of a pay per view section. With a discount yearly rate to access premium content or monthly rate no more than $10/month.
I would also implement a premium user option, as others mentioned. Basically companies can use youtube services, with their own branding and control. The Premium user will control where the content can be access on the internet thus allowing them to charge for their content.
The third thing I would do as ceo, is purchase a quality live streaming site. It would be called Youtube live, and it would have youtube’s global branding and resources to help it evolve and gain market share.
I am going to go out on a limb and disagree with everyone about trying to acquire premium content. Right now between HULU, network sites and other competitors it is a very saturated market. Instead Google should do with YouTube what they have done with their other free services in the business world.
Why not contract with the thousands of schools to allow for streaming/recording of classes for students that are either remote or want to continually review classes? What about creating a real time engine to allow for video conferencing or allow the presentation of power point files.
Instead of chasing after the Premium Content, google should do what they have always done, find a way to do things different then everyone else.
Hello,
I guess YouTube has to take advantage from the fact that millions of people watch video’s on their website very day. The solution thus must be in the video’s.
They could show every user a TV commercial in the flash player once a day. This way, YouTube could earn million’s a year. And if the client wishes to pursue ‘brand integrity’, YouTube could offer to play the commercial only on the higher quality video’s like music video’s and movie trailer.
That’s the way they should do it in my eye’s.
~Bob Jansen.
As YouTube CEO I would introduce a revenue sharing premium video service. Any publishers wishing to utilise YouTube’s audience to provide premium content like How-To videos, Amateur productions, Professional productions etc can enter into a revenue sharing stream that sees YouTube’s costs covered and the profits shared between the content producer and YouTube, the facilitator.
Consumers would then be asked to pay a fee per video which could be paid for from a pre-paid account as mentioned earlier. That fee would be above minimum amount as set by YouTube based on file size and any revenues above that minimum are split 50-50 between the producer and the facilitator.
Producers would be encouraged to provide free versions as, either shorter “teasers” or older content for consumers to “taste”. YouTube would provide the premium content through a “preferred” connection which would provide more reliable bandwidth and playback.
YouTube also need to “throttle” some of the free content so that it is not leading to spiralling costs in both storage and bandwidth. Lightly viewed content that isn’t pulling enough pageviews to generate revenue should be scrapped each month – too few views and the video is dropped. Again, if a consumer wishes that content to remain, they can pay a fee per month or year for it to be maintained.
They should, if they don’t already, look at hosting some of their storage in other hubs around the world and with some smart software, videos can be moved to the regions that upload the most often and reduce costs that way – in fact some software could be mirrored to the remote sites as well as the “prime” location.
There are certainly a number of ways to attempt to coax money from the users as well as ways to reduce the overall costs involved in providing the service. $400+ million per years in the red is a lot to be losing and while companies can certainly find some advantages, taxwise, with having a subsidiary company lose money, you don’t pay $1.65 billion to buy that loss. YouTube needs to make money and it needs to begin making money soon…
Sell it for as much money as possible and run. “We’ll figure out the money aspect of it later” is a quote heard often in the halls of google. Even with the discounts google may get, their income from advertising has yet to pay the monthly bills to keep all the lights on. Which is a feat in and of itself when you’ve got an average upload of 20 hours of footage per minute, 19 of it being cute video clips of people’s adorable pets. I’d rather be the CEO of Two Girls One Cup… now that was a winner.
Give some delay before streaming videos for free users. They can charge minor amount(4-5$ per month) for immediate streaming. As there are large no. of visitors, i think google can cover its loss upto some extent.
Hm… Well…
I’ll start from simple.
You say P2P for videos. So, what will people see when they didn’t pay? Low quality? Well i guess, it would suck
Well, more uploading for premiums isn’t good too.
But… Guys, everyone knows that sometimes people has trouble downloading videos from YouTube. What about when you’re premium user, you can download limited videos? Or monthly plan? Also, multi-formatted downloads. Not like only .FLV (flv convertors… duh…). Well it’s not bad. Cause, iTunes store sells musics, videos for money. But you can download that music for free and it brakes law.
They can make premium channels too. Like MTV will have a channel that will have great Music Videos which they can watch. Like $X for watching this channel and $X for downloading this video or so.
Not a lot of users will go to premium user, if there are no lifetime free. All are permissions. Personally I like YouTube. Watching Music Videos and etc. Sometimes i have problem(s) with country: “This video can’t be watched in your country” or so… They just can replace it: “This video/channel can be watched by premium users only”.
I would start by making the site easier to use, better looking, add new features, and improve video quality.
Sites like vimeo or blip.tv blow youtube out of the water on all these fronts, they just didn’t reach critical mass the same way youtube did.
Usually with two equivalent services, the better designed (in the general sense, not just graphic design) one wins in the end, which is what I think is happening with myspace vs facebook.
This $470 million dollar loss is a big one. But if your a site thats getting MILLIONS of views a day you think what way can I turn some kind of profit out of thoes views? Easy – Ad Space. sell tiny 15 – 30 second time slots before each video. And the upside with this is more and more oppurtunitys become available as you do this. Then you can have PREMIUM members which can skip the ads and etc, etc, etc. So what I’m saying is YouTube is basically setup to start making revenue like they never have before, and this is just like any other site. If you have a CONSISTENT mass amount of members that visit your site well then incorpate something small that happends a # of times to the mass amount of people. Get what I’m saying?
Heres an example…
Lets say SMALL speaking
on an average
300K People login to youtube. Each of them watches 3 videos ON AVERAGE. ( I goto youtube once a day and watch a buttload of videos =P )
Thats 900k Videos watch. So say each of thoes had a Paid Advertisement infront of the video, at $.10 per advertisement. ( Some places pay a lot more! )
thats $90k. X 365 = 32,850,000
So thats $32.8 Million they could of made for doing basically nothing. Now this is on a small scale, as well as not including any other premium paid services they offer such as a paid membership etc.
Pros -
-Companys Consistenly buying TubeSpace ( Ad Space )
-Opens up the oppurtunity to offer Premium Memberships.
-Opens oppurtunity to allow artist, moviemakers, etc to pay to not have their videos advertised on?
-A good amount of revenue is being brought in.
-Plan does not affect the visuals of the main site.
-A Simple and non expensive method.
Cons -
-Maybe a possibly loss in a few members with anger management who don’t like to wait 30 seconds between each video?
-?
I’ll end my post with this.. I’ve been a consistent watcher at youtube since its been around and every once in a while I think to my self. How do they run this place? Like mentioned up there videos are not small and this site holds millions of videos at no charge to anyone! And day goes by still no fees or anything. So after hearing about this mega loss YouTube has taken I think its time, they take this step and implement this because its a simple and cost effective plan that may just say the company.
-George K.
-Age 15
-georgekuka@gmail.com
1) They should make contract with the big corporations. A lot of the youtube videos are removed for copyright claim by big fat corporations like WMG. The Artist and the Bands should not make contracts with those corporations. Youtube promotes their music FOR FREE! Do you have any idea how many people discovered new music over youtube? Youtube Shuld Step up and do something about it!Youtube is like MTV and Radio Stations! They promote their music.
2)They must make a Vlog on their homepage with the most exiting videos.Based on Votes and maybe picked up by the youtube employees.So everytime you visit the homepage there will be something new and interesting.
3)They shuld show the rating of the related video so you can expect what you are about to see.
4)They should remove the FAKE videos (fake screenshots,non relative content, lots of keywords, etc) and warn the account holder.If the account holder has other warning they should delete his account or at least disable him for uploading other videos.
There are more stuff to do on youtube to make it better.I dont have the time to talk about it.Its their business, not mine!
1. One thing google will pursue in the feature is video search and considering they have the largest library of video it would come in handy. I’m not sure how they would monetize this but there are a couple of methods.
2. Not all of youtube’s video content is questionable if they separate the wheat from the chaff I’m sure they could convince more advertisers to place ads.
3. They could pursue something like Revision3 which is premium content but not from the major studios.
Not sure if this was brought up:
Charging for Embedding Videos!
A flat rate of .01 cent (or more) per view . . . would surely give more work to freelancers, and also give more income.
The model of YouTube charging for embedding Pay-per-views would generate income, while also presenting advertising revenue and being paid to do both.
Not too sure if I’d follow and embed ad much, but then again, I’m a freelancer. But it would surely up the ante for video delivery!!
Thoughts?
Append:
Give more income to YouTube, by them charging users a fee to embed their content.
Een if it’s your own content that you’re sharing — You’re still utilizing YouTubes’ Bandwidth.
So charging for Embedding Services make sense.
Another model would be to charge for full length movies, like iTunes — except charge by the Hour 0.69 cents per hour, almost beats the dollar rental boxes.
$20.00usd a month, 30 hours of feature videos — we’re talking recently released DVD hit movies.
Sure they only keep 15% for delivery — but it beats their current take.
That’s an easy one though, probably too easy for top execs to see.
Unless they read this!
Pay-per-view entertainment.
Cable is already doing this but some people(most now a days) watch movies/tv shows/sports on their computer whether it is legal or not, they don’t care. Most of them do not even know what is illegal.
Youtube can use your model to partner up with sports and stream live sports and charge less than what cable charges. Lets say $30/PPV. Youtube can give the sport channel $20 and keep $10 for them selves. They could also spend a little more (I would do this instead) and have their own system setup on game stadiums and strem directly from there. There would be only 1 time costs and some small costs to pay (only one time instead of per viewer) to the facility. This would help them a lot specially when they are already doing similar things with showing old movies on youtube.
PPV Movies.
They cost around 5-10 dollars depending on your cable provider. Why not charge $5 and keep only a $1 for them selves? People would go with youtube because of the video quality. Youtube have 720p now! Yey
This is a very interesting topic and one that poses a whole lot of problems both technically and in profitability. After reading the article I had a very bold idea to expand the presence of youtube and lower the bandwidth cost for them. There was talk of using a P2P technology to lower bandwidth and thus saving a lot of cost to youtube. If you can greatly lower the bandwidth cost then the amount of revenue you need to gain from advertising goes down dramatically. This could save the user experience from getting so bogged down with adds that users go elsewhere.
So with that said what is the bold solution. Well in order to effectively use a p2p technology you need a lot of users spread out geographically that are willing to offer valuable hard drive space and bandwidth sharing. The problem is youtube doesn’t have a current system for deploying this to the masses unless they all install a torrent client on their computers. They need to get into the homes of america and get on a device with a large amount of storage and is net connected. My big bold solution is one of two paths. Either acquire Tivo which already has a huge subscriber base and use the existing devices as P2P devices, or start your own DVR company and get the devices into as many homes as possible.
The technology could be easily scaled with some simple algorithms that allow content to be stored on user device (with their permission) for a certain period of time. For example recently watched videos would remain on the device and P2P enabled for 48 hours. And also, space dependent, any of the users favorites would automatically be stored on the device even if they haven’t watched them on the DVR itself. The user account would always be linked to the favorites, the P2P network, and since DVRs always stay on, its a perfect file share. Now if we could just address the upload speed.